In late October I learned that Waddell & Reed Financial (NYSE:WDR) would slash their quarterly dividend from 46 cents per share to 25 cents (a 45.7% reduction!) beginning with its Q1 2018 payout on February 1st. This would drastically cut my annual yield for WDR from 10.61% to 5.77%.
I normally make 5.00% my “cut and run” point for a formerly high yielding taxable stock, but 5.77% was close enough to warrant immediately selling the stock off while the selling price was still good at the time (my total WDR cost basis is approximately $5203). So I sold off all 300 shares of WDR at $20.13 per share for a total sale of $6039, making a capital gains profit of approximately $836. Considering that I’ve held WDR for less than a year and have received some dividend payouts, my WDR investment proved to have a respectable total return.
Unfortunately, because I have owned WDR for less than a year, there will certainly be a tax hit, despite the dividend being qualified. As of this moment, WDR is currently priced at $19.22 so I’m glad I bailed out when I did. Another bonus to my sell off timing is that I sold after WDR’s October 10 ex-div date, so I collected a $138 dividend payout on November 1st. A nice parting gift from WDR.
Having a very ETF/CEF heavy portfolio, I was a unhappy about dropping Waddell & Reed Financial as it was one of the few company stocks I held. If the stock continues to drop and the dividend yield rises as a result, then I may snap it up again.
So what will I do with the cash from this sale? I will probably buy a dividend stock that yields 9-10%. I’m not sure when this will happen, but probably sometime soon as this sale put a serious dent in my projected averaged monthly dividend income.